Section 179 of the Tax Code

H. R. 5297 which became effective on 27 September 2010  (also known as The Small business Jobs and Credit Act of 2010) has had a substantial impact on Section 179 of the tax code. The biggest impact is the limits have been increased (almost doubled) allowing business to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of equipment you can deduct the FULL purchase price from your gross income. It is an incentive created by Congress to encourage businesses to invest in themselves and stimulate the economy.

How is this different from depreciation?  The difference between Section 179 and depreciation is simple, with Section 179 you are able to write off 100 percent of qualify equipment in one year versus a percentage of the cost of equipment over several years.  For most small businesses that purchase computer equipment, software (including Electronic Medical Record software) and vehicles the entire cost (up to $500,000) can be written off on the 2010 tax return.

All businesses that purchase or finance less than $2,000,000 in business equipment during tax year 2010 should qualify for the Section 179 Deduction.  In addition, most tangible goods qualify for the Section 179 deduction.  One word of caution; the equipment/ software must be put into service between January 1 and December 31, 2010.

What does all of this have to do with ZipChart?

With the increase in the allowable amounts in Section 179, practices would be able to invest in equipment for their practice, as well as purchase/lease the computers and software for ZipChart and write off all of the cost in 2010. Decrease your total income and pay fewer taxes.  That sounds much better than taking a percentage over several years.